Oil prices drop as global warming rises

By David Suzuki with contributions from David Suzuki Foundation's Senior Editor Ian Hanington

With oil prices plunging from more than $100 a barrel last summer to below $50 now, the consequences of a petro-fuelled economy are hitting home — especially in Alberta, where experts forecast a recession. The province's projected budget surplus has turned into a $500-million deficit on top of a $12-billion debt, with predicted revenue losses of $11 billion or more over the next three or four years if prices stay low or continue to drop as expected. Alberta's government is talking about service reductions, public-sector wage and job cuts and even increased or new taxes on individuals. TD Bank says Canada as a whole can expect deficits over the next few years unless Ottawa takes money from its contingency fund.

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It's absurd that a lower price on a single commodity could have such a profound economic impact, but that's what happens when you put all your eggs in one basket and fail to plan for such contingencies. With a population and oil-and-gas production profile similar to Alberta, Europe's largest petroleum producer, Norway, is also feeling the impacts. But much higher taxes on industry, majority state ownership of the country's largest oil-and-gas company and an approximately $900-billion sovereign wealth fund built from oil revenues are cushioning the fall.

Some see low fuel prices as good news, but there are many downsides. With driving becoming less costly, more cars and trucks could be on the road, which is good for the auto industry but bad in terms of pollution, climate change and traffic accidents. And because the price of oil is now lower than the cost to extract oilsands bitumen, the industry is starting to put the brakes on rapid expansion plans — bad news for workers and businesses in Fort McMurray and those heavily invested in the industry but good news for the planet.

Recent research shows most of Canada's oilsands bitumen — as well as all Arctic oil and gas, most of Canada's coal and some conventional oil and gas — must be left in the ground if the world is to avoid a global temperature increase of more than 2 C above pre-industrial levels, the internationally agreed-upon threshold for limiting catastrophic impacts of global warming. The report, by researchers at University College London's Institute for Sustainable Resources and published in the journal Nature, concludes a third of the world's oil reserves, half of gas reserves and more than 80 per cent of coal reserves must not be burned before 2050.

The study also found that carbon capture and storage, touted as one way to continue exploiting and burning fossil fuels, is too new, expensive and limited to make enough of a difference by 2050.

Study co-author Paul Ekins told National Geographic that putting hundreds of billions of dollars into fossil fuel exploration and development is "deeply irrational" economic behaviour. "What would be ideal," he said, would be to "use the opportunity of this fall in the oil price to start instituting a global carbon tax, which would take some of the volatility out of the prices." Removing fossil fuel subsidies would also help.

John Stone, a Canadian scientist and lead author on the most recent Intergovernmental Panel on Climate Change report, told CBC the UCL study "is another wake-up call to snap us out of our denial of climate change."

With 2014 confirmed as the hottest year on record, and 13 of the hottest 15 years having occurred since 2000, we can't afford to ignore the consequences. According to researchers, the odds that natural variability is causing today's climate change are less than one in 27 million! It's astounding that, in the face of such overwhelming evidence from scientists worldwide, people continue to deny the problem exists or that humans are responsible and can or should do anything about it.

It's especially irresponsible when energy conservation and cleaner fuel alternatives offer so many economic benefits, including job creation, greater stability and reduced health-care costs. As world leaders prepare for the UN climate summit later this year, we must look at the recent market meltdown as an opportunity to shift away from fossil fuels. It'll be much easier and less costly to get on with it now than to wait until we're left with few choices.

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3 Comments

Jan 28, 2015 7:01 PM

Alex Middelveen says...

I am an environmentalist, but I know for a fact that getting rid of subsidies on fossil fuels would only make it harder to produce more oil.

That being said I am pro carbon tax, and I am anti subsidies, and I only said that, because the logic was wrong.

Canada has had the lowest employment rate since 2000 according to a recent CBC article. China and Germany are quickly moving ahead on solar energy. Maybe it is time for Canada to take charge and work on some kind of solar initiative and make Canada a tax haven for green companies.

Anyway good article.

Jan 24, 2015 5:35 PM

Robert Smith says...

While the fact based estimate of current climate change occurring naturally is 1 in 27,000,000 the odds we have already reached the tipping point and headed for runaway climate change is already high enough to spook petro countries. Every producer is pushing to get as much product to market before runaway global warming shuts down the fossil fuel economy forcing green alternatives. Although capital investment is shutting down many will continue at a loss hoping to reclaim as much borrowed investment funds as possible before hurricane season in the high Arctic.
The evidence of human caused climate change is already serious enough to put the entire tar sands at risk as per leaving it in the ground has already stopped cap ex. Even if low oil prices shuts down many fracking wells limiting global supply OPEC will open the taps to get as much product out before shutting down the fossil fuel industry become the only option to dealing with runaway global warming. They, like all producing countries, know the ride will soon be over and I agree, we have already reached the tipping point and the runaway affect is too close to limit production so they will continue to push as much product out regardless of price. Change is coming and compared to historical events it is moving at the speed of light.

Jan 24, 201510:09 AM

Jon Lehti says...

Here is the opening. Shift away from fossil fuels into alternatives and make them happen. Wind, solar, salt water, etc.

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